The great trade-deficit hoax

It takes only two things to keep people in chains:
The ignorance of the oppressed and the treachery of their leaders.Image result for in chains——————————————————————————————————————————————————————————————————————————————————————————–

Here is a direct quote from one of President Trump’s recent tweets:

“From Bush 1 to present, our Country has lost more than 55,000 factories, 6,000,000 manufacturing jobs and accumulated Trade Deficits of more than 12 Trillion Dollars. Last year we had a Trade Deficit of almost 800 Billion Dollars. Bad Policies & Leadership. Must WIN again!”

It is a classic example of how selective facts can produce a wrong conclusion.

Here is the other side of that coin:

Fact check: Is Trump right about the size of trade deficit?

Trump persistently miscasts the trade balance, citing the U.S. deficit in goods and ignoring the U.S. surplus in services. The actual trade deficit last year was $566 billion.

As for manufacturing, Trump leaves out what is widely regarded as the main reason for the decline in factory jobs — automation and other efficiencies.

What he doesn’t say is that despite the loss of those 5.5 million factory jobs, the U.S. economy overall has added a net total of about 40.6 million jobs in that time. 

Bottom line: The U.S. has been moving from “brawn” factory jobs toward “brain” office jobs. Is that a bad thing?

O.K., so Trump is ignorant and a compulsive liar.  You already knew that. But what about that trade deficit. Would you say it is harmful or beneficial?

Think of where you’ve spent your money, this year. You’ve shopped at grocery stores, drug stores, clothing stores. You’ve gone to movie theaters, restaurants, ballparks, retail malls. Perhaps you bought a car. You might have shopped online.

In each case, you gave them money and in return, they gave you goods and services.

In short, you ran a “trade deficit” with every grocery, drug, and clothing store — with every movie theater, restaurant, mall, car dealer, ballpark, and online provider.

That is exactly what a “trade deficit” means. One party gives another party money in exchange for goods and services. After the exchange, which party “WINs” (to borrow Trump’s term), and which party loses?Image result for trade

Clearly, both parties win. It’s an even exchange, which both parties desire.

When you bought that loaf of bread, did you feel that you “lost”? If you had, you wouldn’t have bought the bread.

You wanted bread; the retailer wanted dollars; you both got what you each wanted.

That exchange just as easily could be termed a trade “surplus” as a trade “deficit,” since you came out with a surplus of bread.

When the U.S. runs a trade “deficit” with the rest of the world, which we do almost every year, it doesn’t mean we have “lost.” It means we have received valuable goods and services in exchange for dollars, which our Monetarily Sovereign government can create endlessly, at the touch of a computer key and at no cost.

When you personally engage in overly large trade deficits, i.e. buy too much stuff, you can run short of dollars to pay your bills. You even can go bankrupt, as Trump’s companies often have. The reason: You are monetarily non-sovereign.

Similarly, cities, counties, states, and businesses cannot run trade deficits endlessly, because being monetarily non-sovereign, they can run short of dollars.

But the U.S. is Monetarily Sovereign. It never can run short of its own sovereign currency the dollar. America never can run short of dollars.

The early settlers of our nation built and maintained their own houses; they grew and prepared their own food; they sewed their own clothing; they even taught their own children, in the home. They mostly were self-sufficient.

Now, in our modern society, you purchase your houses from home builders; you purchase your food from farmers and processors; you purchase your clothing; you pay people to do your plumbing, carpentry, landscaping, sewage removal, and road paving. You pay schools to teach your children.

When Americans were self-sufficient, they didn’t run trade deficits.  They didn’t buy things. Today, you run trade deficits; you buy most of what you want from people who more efficiently can supply these things.

You buy from China, the things it can produce better or more cheaply, than comparable things, made here in America. Would it benefit you to purchase “Made in America” goods and services, if these goods and services were more costly or less useful than those made in China?

Trump claims that the U.S. should be a net importer of dollars.

If instead of having a trade deficit, we had a trade surplus, we would become a net importer of dollars — the very last thing this Monetarily Sovereign nation needs.

We would be sending our precious assets overseas in exchange for the one thing of which we have an infinite amount: U.S. dollars.

Finally, tariffs — both import and export — are not paid by China or the rest of the world. They are paid by you.  The tariffs on imported goods are dollars added to the price. Those dollars leave the U.S. private sector and are sent to the federal government.

The same President who boasted about how much his tax cuts would benefit the economy now proposes tariff tax increases to  — you guessed it — benefit the economy. 

How increased taxes, which take dollars from the private sector and give them to the federal government, which has no need for them, can benefit our economy has yet to be explained.

And when China, and the rest of the world, institute their retaliatory tariffs against our goods,  our factories and farmers either will have to cut profits to remain competitive or lose sales. Either way, the U.S. workers will be hurt.

I can understand why Trump wants this trade war. He is a stupid, vindictive, semi-literate man, who obtains his ideas from the stupid, vindictive people of Fox and Friends.

I even can understand why Trump’s followers buy into this economic catastrophe. They don’t understand the realities of international trade; they believe whatever their failed hero tells them.

What I cannot understand is the GOP members of the Senate and the House. These people know America will be hurt, but are too spineless to fight. They would rather see the people of America suffer than to displease this egomaniacal President.

In that sense, they choose their party over country, which makes them traitors to America.

May they be damned to eternal fires, especially the religious right, who while claiming morality, have sold their souls to the devil.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.


MONETARY SOVEREIGNTY

16 thoughts on “The great trade-deficit hoax

  1. Just in case you still believe Trump when he said, “Trade wars are easy to win,” please read this:

    How China can win a trade war in 1 move

    If things do spiral into all-out trade war, it’s worth noting China has a nuclear option.

    I’m referring to rare earth metals.

    These are elements like dysprosium, neodymium, gadolinium, and ytterbium. They aren’t actually rare, but they do play crucial roles in everything from smart phones to electric car motors, hard drives, wind turbines, military radar, smart bombs, laser guidance, and more. They’re also quite difficult to mine and process.

    It turns out the United States is almost entirely dependent on foreign suppliers for rare earth metals. More importantly, it’s almost entirely dependent on China specifically for rare earth metals that have been processed into a final and usable form.

    Basically, if China really wanted to mess with America, it could just clamp down on these exports. That would throw a massive wrench into America’s supply chain for high-tech consumer products, not to mention much of our military’s advanced weapons systems.

    Perhaps Trump is right. Perhaps trade wars are easy to win — and even easier to lose.

    Liked by 1 person

  2. Agree, all good points, Rodger.
    Wouldn’t it be more against China’s interests to engage in this type of a war? After all they’re the ones with such massive surplus! Their entire manufacturing infrastructure has been built around this surplus strategy. I feel they could be hurt even more, which of course, does not help us necessarily. But it draws them towards negotiations. After all, something needs to be done about their blatant IP piracy … US spends mega trillions on all the R&D, and all they do is conveniently copy, step and repeat… without any repercussions. I agree tariffs may be the wrong way to go about it, but if China wakes up to the realization that the world will no longer tolerate Chinese gov’t’s “look the other way” attitude towards piracy, then all industries (incl electronics & entertainment) may get a huge boost!

    Your added comment above suggests China can simply bully the world and there’s nothing we can do about it, singularly or collectively.

    Liked by 1 person

    1. China is Monetarily Sovereign. They never can run short of yuan, a currency that is widely traded and widely accepted. Therefore, the Chinese government can, and does, support its manufacturing sector.

      They could dump all their manufactured goods into a deep pit, and still provide for their citizens. They do not need to import dollars (i.e. export to the U.S.) to grow their economy. Nor do they need euros, pounds, pesos or any other currency. They can do it with yuan.

      One might wish to believe this whole trade war exercise is all about piracy, but is there any evidence Donald Trump has the intelligence to think that way? Really? Isn’t it more likely he was watching Fox and Friends when one of their talking morons said something about our trade “deficit,” and Trump figured this was a good way to take attention away from Stormy Daniels? That’s more Trump-like, don’t you think?

      Yes, China can bully the world. The U.S. can bully the world. The EU can bully the world. And that is why when one of them has an idiot for a leader, the world is in danger. A recession is coming and Trump will tell you it’s Hillary’s or Barack’s fault.

      Liked by 1 person

  3. Thanks for your explanation. My thinking is that China was a developing country until fairly recently. So its trading arrangements were softened to facilitate its trade. they had exemptions and free rights that now need to be revised. That’s the only thing Trump needs to act on.
    As for the rest, the USA outsourced its production to China and elsewhere not just because it was cheaper but to cripple the unions.

    Like

      1. Of course it’s there. But the US is not known for it.In Oz we might call an old friend “you old bastard”. I doubt you could get away with that in the US.

        Like

  4. As usual, Trump accepts no blame. It’s all Obama’s fault. Probably Hillary’s, too.

    Donald Trump’s response to Syria gas attack: blame Obama

    The scale and horror of Tuesday’s gas attack on civilians in Idlib highlighted the vacuum in the Trump administration’s foreign policy making: the incident was met first by silence, then by criticism of Barack Obama.

    Donald Trump described the attack, which killed scores of victims, including many children, as a direct “consequence” of his predecessor’s Syria policy.

    “These heinous actions by the Bashar al-Assad regime are a consequence of the last administration’s weakness and irresolution,” he said in a statement. “President Obama said in 2012 that he would establish a ‘red line’ against the use of chemical weapons and then did nothing.”

    The reflex illustrated Trump’s enduring sense of being in his predecessor’s shadow, reinforcing the impression given by his obsessive tweeting of unsubstantiated claims that Obama wiretapped him.

    As with healthcare, Trump’s policy on Syria has been defined by the desire to unpick Obama’s legacy – without a clear picture of what would replace it.

    Like

  5. Today’s Trump insanity:

    1. President Trump condemned the attack on Twitter Sunday, blaming former President Obama for not conducting regime change in Syria. [BBC News, Reuters]

    2. “Fire at Trump Tower is out,” President Trump wrote on Twitter. 1 dead; 6 injured. “Very confined (well-built building).”

    3. Trump redoubles attacks on FBI, DOJ, Washington Post

    4. Trump defends Pruitt amid ethics scandals: “Record clean Air & Water while saving USA Billions of Dollars. Rent was about market rate, travel expenses OK. Scott is doing a great job!”

    5.”Kelly blew up at Trump in an Oval Office meeting” in late March, “and while walking back to his office muttered he was going to quit.” Kelly’s arrival in the West Wing was greeted as a shift toward order and normalcy, but Trump reportedly ignores his input on many issues.

    6. font color=”#0000ff”>Why President Trump’s War of Words Against Amazon Could Backfire Amazon has been building out its logistics network and people believe that the company has ambitious plans to handle the bulk of its package delivery, in a move that could challenge FedEx, UPS, and the Postal Service. Any move by the post office to increase package rates could give Amazon a financial incentive to accelerate those plans, which could spell trouble for the post office.

    It’s just another crazy day in Trumpland. Trump backers, enjoy the stupid.

    Like

  6. Hi Rodger,

    When Walmart or Target imports a container full of, say, denim pants from China, it’s not the monetarily sovereign federal gov’t that pays for those, is it?

    The point I’m trying to clarify is your assertion that it’s not going to harm us if we continue to sustain trade deficits because our federal gov’t has unlimitedsupply of dollars anyway.

    If a privately owned enterprise like Walmart imports stuff to be sold to American consumers, existing dollars in our economy do in fact gets drained to the foreign sector.

    Like

    1. Zen, you have put your finger on three separate deficits: INDIVIDUAL private sector deficits (i.e. Walmart’s payments to China), ECONOMIC deficits and FEDERAL deficits.

      When people worry about America’s trade deficit, they are talking about ECONOMIC deficits, over which the federal government, being Monetarily Sovereign, has total control. If Trump is concerned about the ECONOMIC (trade) deficit of $800 billion, all he needs to do is run a FEDERAL deficit sufficient to add $800 billion more dollars to the economy, thus maintaining the money supply.

      Problem solved, without a stupid trade war with China.

      As to INDIVIDUAL, private sector deficits (like Walmart’s) those are overcome with Walmart’s profits.

      The above shows the absolute craziness of worrying about the FEDERAL deficit (which adds dollars to the private sector) and the TRADE deficit (which subtracts dollars from the private sector). By controlling FEDERAL budget deficits, the government can control our ECONOMIC deficits.

      Bottom line: The federal government has the unlimited power to control the domestic money supply and should not worry about the trade deficit (which provides lower prices and superior products to the American public.)

      I’m not sure I’ve been clear. The word “deficit” seems to confuse people, because every “deficit” has a different effect on the economy.

      Like

    2. I also should have mentioned that a monetarily non-sovereign entity does not have the unlimited ability to overcome trade deficits by deficit spending, so for them, a trade deficit would be a problem.

      The U.S. states, for instance, find trade deficits to be worrisome.

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s